Achievement Test 5: Chapters 9 and 10
Financial Accounting, 5e
Section # _________
PART I — MULTIPLE CHOICE
Designate the best answer for each of the following questions.
Use the following data for questions 1 and 2 below:
Quayle Company bought real estate, on which there was an old office building, for $800,000. It
paid $80,000 in cash as a down payment and signed a 10% mortgage for the remainder. It
immediately had the old building razed at a net cost of $70,000. Attorneys were paid $12,000 in
connection with the land purchase and an additional $6,000 in connection with permits and
zoning variances necessary for Quayle's new office building. $40,000 was paid for excavation for
the basement of the new building, $2,800,000 was paid for construction of the new building, and
$150,000 was paid for a parking lot and necessary walkways and driveways.
The new office building should be recorded at
Land should be recorded at a cost of
Kotsch Textile purchased machinery for $80,000 eight years ago. It was expected to
have a useful life of ten years, no salvage value, and was depreciated using the
straight-line method. At the end of its eighth year of use, it was retired from service
and given to a junk dealer. The entry to record the retirement includes a
debit to Loss on Disposal for $16,000.
credit to Depreciation Expense for $8,000.
debit to Machinery for $80,000.
credit to Accumulated Depreciation—Machinery for $64,000.